Does money buy elections?

Mitt Romney has spent big in his quest to become president. But how much does campaign spending matter in an election? - Darren McCollester/Getty Images

Kai Ryssdal: So it's done: the New Hampshire primary. Mitt Romney had it wrapped up pretty early last night. So all the who got how many votes and what it all means in the grand political scheme of things has been done to death by now.

So we're not gonna. We're gonna do the story our way. Campaign finance a la Freakonomics, our once every couple of weeks chat with Stephen Dubner, the co-author of the books and the blog of the same name. It's all about the hidden side of everything. Hey Dubner, welcome back.

Stephen Dubner: Hey Kai, thanks for having me. So we're all widely surprised that Mitt Romney won big last night, aren't we?

Ryssdal: Yes, widely surprised.

Dubner: And it's just as obvious why Romney's been winning, right? At least if we listen to his rivals. Here's Newt Gingrich, who came in a distant fourth place last night.

Ryssdal: All right.

Newt Gingrich: Now we got to go back and, uh, figure out how you run in an environment where you clearly have two guys who are gonna say things that aren't honest and who are going to spend millions of dollars doing so.

Dubner: And here's Rick Santorum, who finished fifth in New Hampshire:

Rick Santorum: I'm a little behind the curve in the sense that Gov. Romney has been spending a lot of money.

Ryssdal: Well, it's not like they're wrong, right Dubner? I mean, Romney does have deep pockets. And just today, his campaign said, 'We've raised almost $24 million in the last three months, in the last quarter.'

Dubner: That's right. And so that makes more than $50 million for 2011. And in previous campaigns that he's run for senator, governor, and president, Romney's spent $54 million of his own money. But you know who else put a lot of money into their campaigns? Let me give you a few lovely names: Steve Forbes, Linda McMahon, Meg Whitman. And you know what? None of them won anything, did they?

Ryssdal: OK. So this is the hidden side of everything part? Is that where we're going here?

Dubner: This is the hidden side of everything. Here's what I want to tell you today Kai: money does not buy elections. At least nowhere near what we've been told. Here's Steve Levitt, my Freakonomics co-author. He once conducted a study of Congressional elections, where he tried to isolate the effect of campaign spending from all the other factors:

Steve Levitt: When a candidate doubled their spending, holding everything else constant, they only got an extra 1 percent of the popular vote. It's the same if you cut your spending in half, you only lose 1 percent of the popular vote. So we're talking about really, really large swings in campaign spending with almost trivial changes in the vote.

Ryssdal: All right. Here's the thing: Steve Levitt, very nice guy, knowledgeable economist. Sadly though, I don't believe him. Because if you look, it's always the guy with the most money who wins.

Dubner: You are right. It is almost always the guy with the most money who wins. That is what we know as correlation without cause. So let me explain. When it's raining out, everybody's got an umbrella. And we know that. But you know what, the umbrellas don't cause the rain. We know that, too. Here's the thing: Winning an election, raising money do go together. But it doesn't seem as though money actually causes the winning either. It's just that the kind of candidate who's attractive to voters also ends up, along the way, attracting a lot of money. And the losing candidate, nobody wants to give money to that guy.

Ryssdal: Right. It makes sense, but what happens when you tell politicians this. This can't be a message that they want to hear, right?

Dubner: Yeah. No politicians going to step forward and say: 'Please don't send me you money. I don't want it. I will not use it.' Look, campaign fundraising has become an arms race, and as is any arms race, the first casualty is logic. Right? But let's look past New Hampshire back to Iowa last week. Here's some good evidence for these politicians. Rick Perry spent $4.3 million on advertising there, which is nearly triple what Romney spent -- and he got 10 percent of the vote. Rick Santorum, on the other hand, spent only $30,000 for ads in Iowa, and he lost to Romney by just eight votes. So much for the money argument.

Ryssdal: All right. So far this is a lot of you talking about politicians and money. Did you actually talk to any politicians about money?

Dubner: Well, do you think they're actually going to come out and say, 'Oh I don't need the money.' Well...

Ryssdal: All right. Fair point.

Dubner: I did find one former politician, at least he says he's former. You remember Rudy Giuliani I gather, yeah?

Ryssdal: I do. Twice the mayor of New York City, and for like five minutes in 2008 the frontrunner.

Dubner: That's right. Well I asked him if money buys elections:

Rudy Giuliani: Campaign spending doesn't mean anything because you can spend it incorrectly. I have lost an election by spending it wrong. I won an election, my first election that I won, I won when I was outspent in a Republican primary. We can see recently in Mike Bloomberg's election. Mike Bloomberg spent $100 million! And he won by 4 percent!

So I asked Giuliani what advice he would give to candidates:

Giuliani: I tell candidates, it's always better to be the candidate with the most money, but you can win without it.

Ryssdal: To finish the sentence, it's better to be the candidate with the most money because that means you're the most popular, right? People like you the best.

Dubner: It's exactly right. It's like saying it's better to be the radio show host with the most money. But really what you want to be is the most popular

Ryssdal: Sometimes that goes together. I don't know.

Dubner: Sometimes it does. Sometimes it does.

Ryssdal: Stephen Dubner, Freakonomics.com is the website. He's back in a couple of weeks. Dubner, we'll see you.

Dubner: Thanks, Kai.

Kai Ryssdal

Kai Ryssdal is the host and senior editor of Marketplace, the most widely heard program on business and the economy — radio or television, commercial or public broadcasting — in the country.

Since joining the flagship Marketplace broadcast in 2005, Kai has hosted the...